India’s economic growth forecast is moderating as the impact of geopolitical tensions and domestic policy becomes visible. The Government is taking several steps to enhance policy decisions and boost the economy, while external factors weigh on growth. The regulatory regime is also consolidating to enhance security requirements. Baseline indices are being updated to reflect current inflation benchmarks and related industrial metrics.
World Bank: The World Bank recently released its flagship report, Global Economic Prospects June 2026 edition. As per the report, growth in India is projected to moderate to 6.6 per cent in fiscal year 2026-27 (April 2026 to March 2027), reflecting a slowdown in private demand growth owing to higher energy prices and other input costs. However, a reduction in Goods and Services Tax rates should somewhat support consumer demand. This is marginally higher, by 0.1 per cent, than the GEP January 2026 edition, as reported by Asia Law Portal. The forecast in the GEP June edition is slightly higher for fiscal year 2027/28 at 7.2 per cent, compared with 6.6 per cent in the GEP January 2026 edition, also reported by Asia Law Portal. Reduced US tariffs and the expected implementation of free trade agreements will likely mitigate the impact of weaker external demand due to the conflict, particularly on merchandise exports.
Growth is then anticipated to rebound over the next two fiscal years, driven by growing domestic demand and a pickup in export growth. In India, reduced revenues due to tax reforms are forecast to be partly offset by slower capital expenditure growth and reductions in non-essential current spending. Over the forecast horizon, trade agreements and structural reforms to improve the business environment are expected to support inflows of foreign direct investment into India. Despite heightened uncertainty related to the conflict, economic activity in India remained robust early this year, supported by resilient domestic demand. Private consumption, particularly in rural areas, has been strong, with urban demand recovering. Collections of taxes from domestic sales have also increased steadily. To mitigate the price pressures arising from higher energy costs and agricultural product shortages, especially fertiliser, several measures have been implemented in India, including a reduction in fuel taxes.
Organisation for Economic Co-operation and Development (OECD): The OECD recently released its Economic Outlook Volume 2026 report, titled ‘Under Pressure.’ According to the report, India’s growth is also expected to moderate from 7.6 per cent in fiscal year 2025–26 to 6.3 per cent in 2026-27 and 6.4 per cent in 2027-28, reflecting the impact of higher energy prices and rationing measures. In India, the fading deflationary impact of past food and energy-price-reducing shocks will be exacerbated by the surge in energy prices and recent currency depreciation. Rising inflation is expected to weigh on private consumption, while investment slows amid higher oil and gas prices and gas rationing. Employment growth and labour market participation are set to weaken. Inflation is projected to increase to 4.8 per cent in FY2026-27, driven by higher food, energy, and fertiliser costs, and currency depreciation. The current account deficit is expected to widen, as higher energy import costs outweigh the impact of weaker domestic demand. More persistent energy rationing could lead to weaker growth. On the upside, energy support could cushion real incomes and consumption more than expected.
Telecom Regulations: The Government of India recently notified a new authorisation framework for telecom services under the Telecommunications Act, 2023, replacing the licensing regime under the Indian Telegraph Act, 1885. In a series of notifications, the Department of Telecommunications (DoT) brought into force key provisions of Section 3 of the Telecommunications Act and notified rules governing the provision of principal telecom services, miscellaneous telecom services, and captive telecom services. The new framework replaces the existing licence-based regime with an authorisation-based system, which outlines how companies will offer wireline and wireless access services. The Government also notified DoT’s Telecom e-Services portal as the official portal through which the new authorisation framework will be implemented digitally. The rules also clarify that obtaining an authorisation does not automatically confer rights over spectrum. The framework also introduces enhanced anti-fraud obligations, including measures to detect spoofing and fraudulent telecom activity. The rules further require that data, logs, and information associated with telecom networks be stored within India, thereby strengthening data localisation requirements.
New Series of Wholesale Price Index: The Office of Economic Adviser, DPIIT, recently released the revised WPI series with the base year 2022-23. The new series will replace the existing WPI series with a base year of 2011-12. In addition, the Office is also releasing a new series of Output Producer Price Index (OPPI), Input Producer Price Index (IPPI), and Service Producer Price Index (Service PPI) for seven services, namely banking, securities transactions, insurance, management of pension funds, railways, air passenger transport, and telecom, with the same base year. Considering the wide use of WPI in price escalation clauses, this index will be released for five years from the date of its release, along with PPI, and will be discontinued thereafter. This will give users sufficient time to switch from WPI to PPI. The transition from WPI to PPI aligns with global best practices adopted by advanced economies and the recommendations of the International Monetary Fund (IMF). The availability of both the Output PPI and the Input PPI provides a better understanding of the price movements of output produced vis-Ã -vis the inputs used in an industry. It also explains how inflation experienced by producers on inputs is passed through to the output.
